Filing Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as liquidation or straight bankruptcy, is a type of bankruptcy allowing you to sell off some of your assets to pay as much of your debt as possible. Of the two consumer bankruptcies outlined in the Bankruptcy Code, it is the only one that provides immediate relief from debt, allowing a discharge in about three to five months. This guide offers a rough guide to filing Chapter 7 bankruptcy today.

Qualification

The means test determines whether or not you can file Chapter 7 bankruptcy. Debtors can file Chapter 7 if their income for the last six months is below the state median, which the court takes to mean that they have insufficient means to pay off their debt. Otherwise, the only bankruptcy they can file is Chapter 13, or a “wage-earner's bankruptcy” wherein the debt is partially paid off in a court-approved repayment plan.

Creditors' Meeting

The creditors' meeting, also known as the 341 meeting, is scheduled a month or so after filing Chapter 7 bankruptcy. Here, a bankruptcy trustee goes over your paperwork and questions some of your claims if necessary. Any creditors present can also ask questions. They also look at your list of assets and exemptions, and take over the liquidation and distribution of proceeds to your creditors.

Creditors don't need to be at the 341 meeting, but your presence is required. Not attending the meeting can get your bankruptcy case dismissed and allow your creditors to resume solicitation actions. If you're using a bankruptcy attorney, they will also attend the meeting and may answer questions on your behalf.

Discharge

After the meeting, the court allows a 60-day window for creditors to contest the terms of the bankruptcy. They can do this even if they were not present at the meeting. Provided no creditor comes forward, you will receive your notice of discharge a few days after the period has passed, typically three to five months after filing Chapter 7 bankruptcy. You will also have to complete a debtor education course, at your own expense and with an agency approved by the court, before you can officially exit bankruptcy.